Colombia’s peso, trading at its lowest level in more than a decade and leading global weekly losses amid a decline in crude oil, is poised for a rebound, according to Banco de Bogota.
“It’s clear oil has a big impact on the peso, but at these levels you have to think the currency has gone too far,” Camilo Perez, the head analyst at the bank, said in a phone interview.
The 14-day relative strength index of the peso versus the dollar sank Friday to 20.42, below the level of 30 that some analysts use as an indication that a currency’s slide will be hard to sustain. The drop is an overreaction, according to Perez, who forecasts the peso will rally to 2,500 per dollar by year-end.
The peso fell 0.8 percent to 2,760.61 per U.S. dollar at 11:22 a.m. in Bogota, the weakest level on a closing basis since May 2004. The currency extended its drop since July 10 to 3.2 percent, the worst performance among 31 major currencies tracked by Bloomberg.
With crude oil accounting for about half of the South American nation’s sales abroad and 17 percent of government revenue, the peso’s correlation with the raw material is the highest in emerging markets.
Brent crude has fallen 46 percent in the past 12 months and 3 percent this week while the peso is down 32 percent from a year earlier.